Make hay while the sun shines, but beware the threat to APR

19 Jul 2018

tractor ploughing field

Though farmers should make hay while the sun shines, they should beware the pitfalls of their activities not being considered agriculture. Land used for hay-making for horse hay is one example of where HMRC may well challenge any claim for Agricultural Property Relief (APR) for inheritance tax purposes, if it is perceived ‘agriculture’ is not taking place.
This issue is particularly relevant given proposals for post-Brexit changes to farm subsidies, with nature and the public interest (rather than food production) as the drivers of a future subsidy system.

The production of hay, although it may seem a straightforward ‘agricultural’ practice, brings potential complications where APR is concerned. Where hay is cut and sold, or kept for consumption by livestock, that definitely constitutes an agricultural activity and APR is protected. But where hay is sold or used for horses, if they are horses that are not kept for agriculture purposes, or the breeding and rearing of horses as on a stud farm, then APR is open to challenge by HMRC.

Though the Vigne case in 2017 was a taxpayer victory regarding Business Property Relief (BPR), it was noted that a claim for APR would have failed because no grass crop had been taken for two years. Where then does that leave farmers who plant meadows for bees? Or field margins left for farmland birds? Or plots planted with seed mix for skylarks?

“Availability of APR is fraught with anomalies,” says Alison Robinson, Partner in Saffery Champness’ Landed Estates Group.

“For example, we have detail in the HMRC guidance showing that short rotation coppice will qualify, but a question mark is left over other bio-energy crops. Relief is available for tree nurseries as well as seeds and plants for flowers and food crops, but it is not clear whether it would be for turf. It is definitely not available in the case of other stock such as reared pheasants, or for grouse moors, even though these may be used for seasonal hill grazing.

“So, if the future plan for subsidies is to move more land out of food production and into delivering for the natural environment, where does this leave APR? Breach of the rules is serious and could result in possible loss of APR on the associated farmhouse, as well as other penalties.

“This is, as ever, a complex area and, where there is any doubt then professional advice should be sought.”

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